U.S. 'kicks can' towards 'fiscal abyss': China's Xinhua

BEIJING Wed Jan 2, 2013 2:53pm IST

An employee working as a money changer prepares U.S. dollar currency for a customer in Jakarta October 28, 2008. REUTERS/Enny Nuraheni/Files

An employee working as a money changer prepares U.S. dollar currency for a customer in Jakarta October 28, 2008.

Credit: Reuters/Enny Nuraheni/Files

Related Topics

BEIJING (Reuters) - The last-minute U.S. deal over tax increases has fixed one problem, but the world's largest economy must get to grips with a budget deficit that threatens not a "fiscal cliff" but a "fiscal abyss", China's Xinhua news agency said on Wednesday.

The state news agency said in a commentary, issued in English on its website, that while the United States was clearly the dominant economic power, it "simply cannot live on borrowed prosperity forever", and its politicians seemed reluctant to tackle its total debt of about $16 trillion.

"In a democracy like the United States, tax increases and spending cuts, the exact dose of medicine needed to cure its chronic debt disease, have long proved hugely unpopular among voters," Xinhua said.

"So the politicians have chosen to kick the can down the road again and again. But as we all know, the can will never disappear. Sometime and somewhere, you might trip over it and fall hard on the ground, or in the U.S. case, into an abyss you can never come out of."

China has a strong interest in a healthy U.S. economy. It sits on the world's biggest pile of foreign exchange reserves, worth $3.3 trillion, and as much as 70 percent of the holdings are invested in U.S. dollar assets, including U.S. Treasuries, according to analysts.

The United States is also a major export market for China.

Global stock markets rose on Wednesday on relief that the U.S. had passed measures to avert the huge tax increases and spending cuts that would have pushed the economy into recession.

However, Xinhua also took aim at U.S. politicians, saying that if they came so close to falling off a cliff, "they are far less likely to reach a deal to help their country climb out of an abyss".

In separate commentaries Xinhua published on Tuesday on the fiscal cliff debate, it called on the United States to live up to its global economic responsibilities and also blamed its poorly functioning political system for the mess.

Such commentaries are not policy statements as such, but can be read as a reflection of Chinese government thinking.

Wednesday's commentary can be found here

(Reporting by Jonathan Standing; Editing by Robert Birsel)

FILED UNDER:

REUTERS EXCLUSIVE

Reuters Showcase

Documents' Leak

Documents' Leak

India widens oil leaks probe to defence ministry  Full Article 

Jim O’Neill Interview

Jim O’Neill Interview

'India can become world’s fifth-largest economy by decade’s end'  Full Article 

Food Security

Food Security

India will not cut multi-billion dollar food handout programme - PM  Full Article 

Bharti-China Mobile

Bharti-China Mobile

Bharti Airtel, China Mobile to collaborate on 4G  Full Article 

Suzlon Energy

Suzlon Energy

Suzlon expects to turn profitable in fiscal 2016: chairman   Full Article 

Eicher Motors Stake

Eicher Motors Stake

Volvo selling up to $300 mln worth of Eicher shares  Full Article 

Rich List

Rich List

Bill Gates tops Forbes rich list, Michael Jordan joins.  Full Article 

Tough Task

Tough Task

India needs sustained GDP growth of 9-10 percent - Jaitley.  Full Article 

Budget 2015

Budget 2015

Budget announcements and reactions from the industry  Full Coverage 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage